Edited version of private ruling

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Ruling

Subject: GST and attribution of GST - insurance premiums - instalments

Question

Are you able to attribute goods and services tax (GST) payable in accordance with Division 156 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you make a supply of insurance and the insured pays the insurance premium by instalments? This question applies to both the instalment payment plan and the interest instalment plan.

Answer

Yes, you are able to attribute GST payable in accordance with Division 156 of the GST Act when you make a supply of insurance and the insured pays the insurance premium by instalments. This answer applies to both the instalment payment plan and the interest instalment plan.

Relevant facts and circumstances

You supply insurance to policyholders.

You are aware this is a taxable supply.

Your insurance contracts are normally entered into for a term of one year and are renewable annually.

You offer the policyholders the option to pay the premiums in a lump sum payment or by instalments for policy holders. The options available to policy holder are set out in the premium notice that each policy holder receives on an annual basis. The premium notice states the payment methods as being either payment plan (monthly or quarterly option); or annual payment.

In addition to this payment option, you have the power to allow the policy holder to pay their premium via instalments where a policy holder is suffering financial hardship. An interest charge is applicable to such instalment plans.

Interest instalment plans differ to payment plans in that they are generally longer in duration and may span more than one financial year, whereas payment plans relate to a financial year only. The instalment schedule is determined by your staff on a case-by-case basis. Your staff determines the regularity and the amount to be paid each instalment.

For both instalment payment plans and interest instalment plans, policy holders receive only one tax invoice (that is, premium notice) per assessment. The premium notice indicates all available instalment payment plan options.

You account for GST on a non-cash basis. You currently attribute GST on all insurance policies to the tax period in which the premium notice is issued.

Reasons for decision

Subsection 29-5(1) of the GST Act provides the general rules in determining the tax periods to which your taxable supplies are attributable. However section 29-39 of the GST Act lists the rules relating to attribution, and item 12 in this section is supplies made on a progressive or periodic basis under Division 156 of the GST Act. Subsection 156-5(1) of the GST Act states: 

The GST payable by you on a *taxable supply that is made: 

(a) for a period or on a progressive basis; and

(b) for *consideration that is to be provided on a progressive or periodic basis; 

is attributable, in accordance with section 29-5, as if each progressive or periodic component of the supply were a separate supply. 

(*denotes a term defined under section 195-1 of the GST Act). 

Goods and Services Tax Ruling GSTR 2000/35 explains the application of Division 156 of the GST Act. Paragraph 25 of GSTR 2000/35 provides that a supply or acquisition is made "for a period" when it is made over a specified length of time or for a time with an identifiable end point. In addition, paragraph 68 of Goods and Services Tax Ruling GSTR 2000/17 states:

Supplies made for a period or on a progressive basis

68. Division 156 provides a special rule for taxable supplies that:

· are made for a period or on a progressive basis; and

· for consideration that is provided on a progressive or periodic basis.

For the purposes of attributing the GST payable and the input tax credit to a tax period, this Division treats each progressive or periodic component of the supply as a separate supply. Examples of these supplies are insurance policies that are paid monthly, annual subscriptions paid on a monthly basis, commercial leases for a period, and building and construction contracts.

You make a taxable supply of insurance to an insured and, in accordance with the terms of the insurance policy, the insurance is supplied for the period specified in the insurance policy. As such, you make a taxable supply for a period. 

Under the terms of the insurance policy, under the instalment payment plans, the insured can elect to pay by instalments either monthly or quarterly over the period of the insurance. In relation to your interest instalment plans for financial hardship employers, the instalment schedule is determined by WorkCover staff who determines the regularity and the amount to be paid each instalment. As such, the consideration for the supply of insurance is to be provided on a progressive or periodic basis. 

You make a taxable supply of insurance for a period and for consideration that is to be provided on a progressive or periodic basis. Therefore, you are able to attribute GST payable in accordance with Division 156 of the GST Act. Accordingly, you will attribute the GST payable on each instalment in the tax period in which each instalment is received. This is applicable to both instalment payment plans and interest instalment plans.

You advise that only one invoice will be provided for both instalment payment plans and interest instalment plans. Paragraphs 69 and 70 of Goods and Services Tax Ruling GSTR 2000/17 state that a single document can be a tax invoice for all components of the supply if it satisfies the requirements in subsection 29-70 (1) of the GST Act

69. As a supplier, you do not have to issue separate tax invoices for each component of the supply. A single document can be a tax invoice for all components of the supply if it satisfies the requirements in subsection 29-70(1), and it shows the price of each component of the supply. For example, a lease agreement for an item of equipment may show the price as $900 a month. This agreement is a tax invoice for all the months if it also satisfies the requirements of subsection 29-70(1).

70. If the price is not the same for every component of the taxable supply, you may attach a schedule to the agreement that shows the price for each component. The agreement and the schedule together satisfy the requirements for a tax invoice.

Please take note that you have requested a ruling solely about attribution of the GST payable on your supplies of insurance. Therefore our advice does not address the extent to which any supplies that you make are taxable.